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Three Major Oil Companies Settle in "Hot Fuel" Lawsuit

BP Products North America Inc., ConocoPhillips Co. and Shell Oil Products US have agreed to settle lawsuits accusing the oil companies of profiting from "hot fuel," gasoline or diesel fuel for which price has not been adjusted for temperature.

The term "hot fuel" refers to the expansion of gas or diesel fuel in the warmer months. Critics charge that when the fuel expands, it delivers less energy per gallon to the consumer, but the consumer is still charged the same price per gallon.

Oil companies argued that consumers benefitted in cold weather because fuel contracts and then contains more energy per gallon than usual. The companies also claimed that it would be too expensive to equip every retail pump with a temperature compensating device.

Sixty degrees is the century-old government standard for gas or diesel sold at the pumps. That is the temperature/volume used in the petrochemical industry to measure all petroleum liquids at the refinery and every point after the refinery, except at the retail pump, according to the Owner-Operator Independent Drivers Association, which has a website, turndownhotfuel.com, addressing the issue. OOIDA has been heavily involved in this issue for several years.

The warmer the fuel, the less measurable energy and fewer miles to the gallons a vehicle will get, says OOIDA. For example, if a vehicle averages 6 mpg, 200 gallons of 98-degree fuel is going to take that vehicle 36 fewer miles than 60-degree fuel.

In 2006, the Kansas City Star wrote a series of stories about the issue, estimating that hot fuel cost consumers $2.3 billion dollars a year. With today's fuel prices, that would be as much as $3.5 billion. After the Star's reports, class-action lawsuits sprouted up against dozens of companies, including oil giants and fuel-station chains.

These three big oil companies, however, are choosing to settle.

Although a preliminary settlement has been reached, details are not yet available, as the judge must approve details before they take effect.

The lawsuits are pursuing a solution that would retrofit pumps to adjust volume of fuel pumped based on temperature. The Kansas City Star reportsthat it's likely the companies won't be required to make these improvements, as "they have sold off most of their retail stations, although those stations still sell their brands." A more likely scenario is that the settlement will instruct the companies to facilitate the adoption of a hot-fuel fix.